Why Insurance Companies Should Collect Patient Payments

As I work to close out the books from 2013, I am struck at how much "bad debt" I am forced to write off. A lot of this debt is $5 and$10 deductibles and co-insurances from in-hospital patients our primary-care pediatrician will never see again having cared for the newborn only for a few days after his birth. Some comes from families that have been dismissed from our practice for non-payment. The dollar amounts are too low to justify sending multiple statements and, even for the larger amounts, the legal risk of reporting to the credit bureau via a collection agency is too high, so I write them off. And it bothers me.

It bothers me for many reasons. First, all those small dollar amounts add up to big numbers and ' my performance bonus goes out the window. Second, why shouldn't these people have to pay their bills when I pay all my bills? Lastly, and here is what I want to talk about in this post, the insurance company's intent to have the patient have some "skin in the game"  is all for naught.

I understand why insurance companies are pushing more and more of the cost of healthcare onto the patients. Although not without controversy, I agree with the "skin in the game" concept that when patients recognize how much one provider cost versus another, the patients may make more fiscally conservative decisions (then again, they may not). Still, knowledge is power and all that after-school special junk and I get it. In real life, though, a significant number of patients are never feeling that pain of payment because we, the providers, have limited power to collect. The patient is getting away without having to pay their portion; a cost that was intended to encourage the patient to not over utilize or to pick lower-cost providers.

A surprisingly high number of our patients "forgot their wallet at home" or state "my ex-husband will send a check" leaving us with a significant amount of accounts receivable. Now I know some of you out there will say, "We don't see anyone without a copay. We send them to the ATM across the parking lot or make them reschedule."  I, personally, am way too risk adverse to enforce such a policy. What if that patient has a seizure or other medical emergency between the time you turned them away and the time of their rescheduled appointment? Providing timely medical care is not the same thing as selling someone a loaf of bread and the liability associated with each reflects that. We see patients at the time of their scheduled appointment and then chase them for the copay or deductible after. If we didn't, we risk a patient's health and open ourselves to a lawsuit that we'd lose.

Chasing after, however, is mostly a losing game. I was recently at an industry event where the speaker pointed out a rise in the number of providers being sued (and losing) because they erroneously sent a patient to a collection agency that reported to the credit bureaus; the error was the insurance company's error, not that it mattered. That was enough for me to stop reporting to collection agencies. While I will eventually dismiss families for failure to pay (for more on how to dismiss patients the right way, I highly recommend this blog post by attorney Martin Merritt),  I stop short of reporting to the credit bureaus. It's too much risk over mostly small-dollar amounts. Of course here again the patient gets away without paying and the insurance company's intended behavior doesn't happen.

Here's my solution: Insurance companies should collect co-insurance and deductibles and not leave it to hospitals and doctors' offices.

Hear me out:. If the insurance companies collected the patient-owed portion, there would be a number of benefits. First, collections are better administered by insurance companies. As I've already explained, providers are bad at it, which defeats the primary purpose (i.e., patient picks cheaper provider). The insurance companies have the administrative staff plus the power (i.e., cancelling a policy) if patients do not pay.

There would be a secondary benefit in that one way to cut healthcare costs is to increase the accuracy of diagnosis. Providers can best diagnose a patient when there is a good doctor-patient relationship and nothing hurts that relationship more than making your doctor the insurance company's collection agent. After all, patients already have grave animosity toward the insurance companies. Adding on collections can't worsen that relationship, but it can lift a huge cloud off of a patient's feelings toward his doctor. It is bad enough doctors lecture us on exercise, smoking, and drinking. Being handed a huge bill (as determined by our insurance company, not our provider) just adds fuel to the fire and makes the patient less likely to be honest with the provider or take her advice to heart.

The more I think about it, the more astounded I am that no insurance company has implemented this yet. At the very least, I'd think the insurance provider would want the providers to report non-payment, but I've never been asked to do so. Patients should have "skin in the game" and know that their medical choices have consequences, both individual as well as communal. That said, until the insurance companies collect these fees themselves, I don't see the impact as being significant enough.